ASIC mulls tougher AFSL entry barriers

The corporate regulator has raised the need to re-address the licensing regime to investigate whether the barriers to entry are too low for financial services providers.

In a submission on reform of forestry managed investment schemes, ASIC raised concerns with the licensing status quo, under which “ASIC must grant an AFS licence to anyone who applies in accordance with s913B of the Corporations Act, subject to them meeting certain requirements”.

The submission suggests that “consideration should be given” as to whether the licensing system should be amended, specifically arguing that the “threshold for obtaining an AFS licence [is] relatively low and the threshold for cancelling an AFS licence [is] relatively high”.

The government should also consider whether there is a gap in “investor expectations and the requirements of the licensing regime”.

ASIC also raised concerns about its inability to monitor misconduct among a licensee’s employees and representatives, with the regulator instead forced to focus its regulatory attention on the AFSL holder itself.

In addition, the submission reiterates its FSI recommendation to introduce a limited statutory compensation scheme in order to help “improve competency and standards among financial advisers; address conflicts of interest; and increase access to safe and appropriate financial advice”.

Deficiencies in the PI insurance and licensing regimes make such a scheme necessary, the submission argued.